What’s Local Sourcing vs Global Sourcing: the pros and cons
When it comes to finding a supplier or manufacturer, you can source from a local company or go global. Both approaches have pros and cons, so to help you understand the key differences between the two, we’ll explain why you might want to keep something local and when to take advantage of a global supply chain.
What is local sourcing?
Local sourcing refers to sourcing products or materials from manufacturers in the home country. Instead of going to international suppliers, you choose to buy from local manufacturers.
Shopping locally often comes at a price. Choosing to invest in a manufacturer in your home country may be more expensive than if you invest internationally. However, local sourcing may also be easier and faster. If you need a quick turnaround, it might make sense to source from a local supplier who can make the product and deliver it within a certain amount of time, rather than worrying about shipping time.
Pros and Cons of Local Sourcing
Finding a local supplier can help your business save time and money. Here are some of the top reasons why you might consider sourcing locally instead of an international manufacturer.
The advantages of local sourcing.
- Local sourcing is great for PR, it allows you to demonstrate your investment in your local community.
- This is great for local suppliers who will benefit from serving and proud of the local community.
- Local sourcing enables you to see exactly what you are paying for as you are able to travel to suppliers for development, management and site inspection purposes.
- Sourcing specialty products from local suppliers becomes much easier as you can visit them regularly to explain your requirements face-to-face.
- Shorten supply chains, which may (if lucky) lead to greater predictability of lead times.
There is an argument that more businesses should support their local economies by sourcing products and services from local manufacturers, however, the reality is that this is not always possible. Each country has its own resources and expertise. It is important to source products from high-quality and reliable manufacturers to progress in business even if they are overseas. When your country is not as skilled in developing the products your business needs, trying to source locally puts you at a disadvantage and leads to problems along the way.
While local sourcing is great for public relations, here are some of the main reasons why international sourcing might be the way to go.
Disadvantages of local sourcing.
- Close ties with local suppliers can lead to ethical issues when selecting suppliers.
- If you’re terminating your contract with a local supplier, it could generate bad publicity locally.
- You may not be able to find quality products in your own country.
- Economic impacts in your home country may affect deliveries and supply chains.
- You may develop resistance to change, especially when you need something innovative and new.
- The suppliers you choose may depend on you as their main source of income.
What is Global Sourcing?
Global sourcing refers to the practice of sourcing goods and services from global supply chains across geopolitical borders. This sourcing strategy is used by businesses worldwide, as international sourcing can save money by helping businesses find cost-effective locations to produce goods.
The term global sourcing can also be used for a business to purchase raw materials or components from international suppliers and manufacturers rather than from the country where the business is located.
For example, run a coffee shop in the US. You can take advantage of international sourcing and sourcing to buy coffee from Guatemala and Colombia at a lower price than in the US. This allows businesses to generate healthy profits.
Before you start to be part of a global supply chain and receive or send your products between consumers worldwide, you need to know where your company stands in terms of the global network.
A company can operate through five different global sourcing levels:
- Level I determined by domestic procurement only
- Level II is international sourcing as needed
- Level III represents a shift in procurement strategy, including international procurement
- Level IV involves the central coordination of procurement in global business locations
- Level V achieved through global integration and coordination with other functional groups
When you define your company’s position in international sourcing, it will provide you with an opportunity to use it to improve its long-term performance in global sourcing.
Pros and Cons of Global Sourcing
The main advantage of global sourcing is cost savings. International sourcing enables many foreign manufacturers to offer their services at very competitive prices, especially in regions where products are typically produced at low cost. Lower manufacturing costs will allow businesses to buy goods in bulk at lower prices, ideal for startups and businesses with limited budgets.
On a global supply chain, you’ll find that low cost is just one of the many benefits you get when sourcing products internationally. Let’s take a look at some of the additional benefits you can enjoy sourcing your products from overseas manufacturers.
Advantages of Global Sourcing:
- You can get a wider variety of products than domestic.
- Get unique, hard-to-find products that can attract more customers.
- Having access to suppliers all over the world means you have more choices than you would at home.
- Overseas suppliers are often more willing to work with small businesses or produce small batches of products.
- You can increase your total supply capacity by using multiple suppliers globally or in different regions, which also protects you from supply chain problems caused by natural disasters.
- You can acquire resources, materials or skills not found at home, such as the ability to produce specific types of products.
- Sourcing overseas is a learning experience that can provide a stepping stone to developing new markets overseas.
- Overseas manufacturers often have significant cost savings compared to domestic sourcing.
While the benefits are great, there are pros and cons to everything in life; this also applies to global sourcing. Here are some common pitfalls that can occur in international sourcing.
Disadvantages of Global Sourcing:
- You may encounter different industrial or technical standards, which may or may not be the requirements of your home country.
- Some restrictions can affect imports and exports on either end of the transaction, such as quotas and tariffs.
- Documentation requirements for cross-border processes can be time-consuming and complex.
- Currency exchange rates fluctuate.
- Long time shipping time
For B2B Buyer: Supplyia.com is your one-stop sourcing to delivery solution
Supplyia is a super-growth China product and drop shipping sourcing agent. We not even only handle Sourcing, also assist with international transport and 3PL. We are one of the most professional Sourcing and dropshipping fulfillment partners in China, proven by our ability to focus on our customers’ needs while staying highly competitive. During the past years, the products we sourced have been distributed to over 60 countries and regions by the thousands, and we still continue to offer that same level of service today. We look forward to cooperating with you and helping your business take off.
𝙊𝙪𝙧 𝙨𝙚𝙧𝙫𝙞𝙘𝙚 𝙡𝙞𝙨𝙩: – Sourcing products – Dropshipping – Suppliers verification & Factory auditing – Price and MOQ negotiation Private label – Products quality inspection – Warehouse service-free storage – Logistics/storage/prep service – Re-packing, bundling, and labeling, Custom packaging
Rather than spend time on local sourcing with emailing factories in your home country and attempting to get in touch with a manufacturer overseas, head over to supplyia.com now to help you find a reliable, high-quality manufacturer that can offer you affordable bulk orders.